Rotate Out of Tech and Get Defensive

This column was originally published on RealMoney on June 9 at 9:46 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

A debate's raging all over the place. The NDX is down 5%, the SOX is down 9%; do you plunge in when prices are low, or do you sell into the ensuing rally that we all expect?

I have to tell you that I am inclined to sell, because it is simply the wrong time on the calendar to buy. Outside Apple(AAPL Quote - Cramer on AAPL - Stock Picks) and some cell-phone names, I think if you buy you are going to stagnate as the macro situation -- the Fed and its minions -- walks all over you.

There's a reason for that: Personal computer sales are awful, and big-screen televisions may now be in glut status. You have lost end-markets. And you don't have this Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) Vista product that would have driven sales. (That's why I like Apple so much.)

Sure, tech is down a lot. But what happens if this is 2000, and the Fed keeps tightening? You could look at this coming rally as the rally of April 2000, when the oversold condition caused a tremendous whoosh up in tech. It turned out to be a great time to reposition.

I think that's the right tactic, sell tech strength and, once again, reposition more defensively. Otherwise, I believe that you will simply lose too much money here and have trouble making it back if you switch later into defensive names.

I think the game plan, if you bought tech on the way down, is to scale out of it on the way up. Between tech and cyclicals -- infrastructure, minerals and mining, oils -- I vastly prefer the latter because they have strong non-U.S. demand. The lack of a catalyst for tech this year just makes it too hard to bet with.

If the Fed sees the error of its ways and starts loosening six months from now, the multi-year cyclicals will rally harder than tech because the numbers there might still be going up even as (I believe) tech's numbers go down.